Australia's government is reviewing the impact of cigarette prices on demand as the illegal tobacco market booms. Experts now suggest freezing the federal tobacco excise. The Treasury is modelling how cigarette price changes affect demand, a key step toward possible policy reforms. Treasurer Jim Chalmers and Health Minister Mark Butler previously opposed cutting the high tobacco tax, which has grown by 60% since 2020. Yet, Finance Minister Katy Gallagher recently said the government "keeps all of these matters under review" and is consulting key departments. Research manager Lachlan Vass from the e61 Institute said the current high excise is failing to curb illegal sales. He believes freezing the excise could lower cigarette costs in real terms, helping fight black market trade as part of a broader strategy. Illegal cigarettes sell for $10 to $15 a pack, far cheaper than the $40+ for legal packs. The black market now accounts for around half of all tobacco consumption in Australia, reports the Illicit Tobacco and E-cigarette commissioner. Despite a $350 million government fund to combat illicit sales, excise revenues plunged from $16.3 billion in 2019-20 to an expected $5.5 billion this year. Economists warn the tax hit a "tipping point" and some call it "spectacularly wrong," fueling organized crime growth. Deputy Treasury Secretary Diane Brown confirmed ongoing work on modelling tobacco demand elasticity. Leading public health expert Professor Becky Freeman supports freezing the tax, saying rising illicit trade means higher taxes won't reduce smoking or improve health. "I only support tax increases if they are effective at reducing smoking," Freeman said. "Now we know the size of the illicit market and how incredibly cheap those products are, I agree that a freeze at this time makes sense. There wouldn’t be any health gains by raising the price."